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Commonwealth Bank of Australia (ASX:CBA) reveals plans to refund fees charged to dead customers

In morning trade the Commonwealth Bank of Australia (ASX: CBA) share price has drifted lower after the banking giant announced action to improve its wealth businesses.

At the time of writing CommBank’s shares are down 0.5% to $69.03.

What was announced today?

Hot on the heels of announcements out of both Westpac Banking Corp (ASX: WBC) and Australia and New Zealand Banking Group (ASX: ANZ), CommBank has announced further actions to improve outcomes for wealth management customers.

According to the release, these include the rebating of grandfathered commissions for Commonwealth Financial Planning (CFP) customers and a review and remediation program for any instances where unauthorised advice fees have been charged to deceased estates.

Management has advised that the planned initiatives involve:

  • Reviewing any advice fees charged to deceased estates across all the bank’s advice licensees and refunding with interest any instances where unauthorised fees have been charged.
  • Taking steps to remove certain fees on legacy wealth products from January 2019, saving customers $25 million annually.
  • Rebating all grandfathered commissions to CFP customers from January 2019, benefiting around 50,000 customer accounts by an estimated $20 million annually.
  • Providing all CFP customers with an option to renew their ongoing service arrangements every two years.

The bank’s Wealth Management CEO, Michael Venter, stated that these changes have been made in response to issues that were identified during the Royal Commission.

He rightfully acknowledged that charging “unauthorised advice fees to deceased estates is unacceptable” and advised that a broader review is underway across its advice licensees that will go back seven years to “ensure that any instances where unauthorised fees have been charged are identified and refunded with interest.”

So far an initial search has only identified 12 deceased estates being charged unauthorised advice fees between April and June 2018 out of 142,000 accounts.

Should you invest?

This is just the latest of a string of negative news flow out of the banking sector in recent weeks. Unsurprisingly, this has weighed heavily on investor sentiment and ultimately bank share prices.

While I think that most of the banks are trading at attractive levels now, it could be some time until sentiment shifts positively and their shares push meaningfully higher.

But if you have time on your side then I think ANZ Bank and Westpac are great options for investors that have limited exposure to the sector.

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Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.